Letter to the Clerk of the Committee from
the Ministry of Defence on Royal Ordnance (25 February 2002)

I refer to your letter of 11 January concerning
Royal Ordnance and apologise for the delay in replying.

The Committee will be aware of the issues surrounding
the closure of the Royal Ordnance Defence (ROD) facilities at
both Bishopton and Nottingham. MOD considered then the issues
surrounding security of supply and value for money and concluded
that the additional cost of retaining these sites at taxpayers'
expense could not be justified on strategic industrial grounds.

In early 2001 ROD informed the Department that,
as part of their company restructuring programme, they intended
to close the Royal Ordnance Special Metals (ROSM) Facility at
Featherstone. After internal consultation, we confirmed that once
current requirements for Depleted Uranium (DU) munitions had been
met, we had no reason to object to their intention to dispense
with this industrial capability.

The Committee will know that in 1999 the Department
entered into a legally binding Framework Partnering Agreement
(FPA) with ROD. In signing the Agreement both parties recognised
that whilst continuing to meet the Department's contractual requirements,
ROD would need to review their business and restructure the company
facilities to deliver efficiencies, reduce overhead costs and
thus meet the world benchmark prices that the Department expects
to pay for munitions. Such reviews are, and remain, a matter for
the Company. As you would expect, ROD has kept the MOD appraised
of developments in its general thinking over the past two years,
and we are aware that ROD is now conducting a further review of
its manufacturing strategy, but we are not aware of any detailed
findings and recommendations that they may come to. We understand
that joint TU/ROD Management Working Groups are considering various
options for the Birtley, Bridgwater and Chorley sites. The Department
views this activity as a matter for the company, and does not
intend to become involved at this stage.

ROD has informed us that they are entering into
an arrangement with Nitrochemie of Germany for the supply of propellant
consequent upon the company's decision to close Bishopton. Again,
the Department sees no reason to intervene with this decision.

We have been notified by ROD that they are also
closing their facility in Blackburn during 2002. We understand
that the fuzing business carried out at Blackburn will transfer
to the plant at Glascoed, South Wales.

The Department has always considered value for
money and security of supply to be key benefits of the FPA. The
sourcing of raw materials and components for the munitions manufactured
by ROD is a matter for the company, and they are fully aware of
the requirement for a secure source of supply of components.